new york state department of financial ...2012/12/31 · 212-480-4935|one state street, 2nd floor,...
TRANSCRIPT
NEW YORK STATE DEPARTMENT OF FINANCIAL SERVICES
REPORT ON EXAMINATION
OF THE
AMERITAS LIFE INSURANCE CORP. OF NEW YORK
CONDITION: DECEMBER 31, 2012
DATE OF REPORT: MAY 14, 2014
NEW YORK STATE DEPARTMENT OF FINANCIAL SERVICES
REPORT ON EXAMINATION
OF THE
AMERITAS LIFE INSURANCE CORP. OF NEW YORK
AS OF
DECEMBER 31, 2012
DATE OF REPORT: MAY 14, 2014
EXAMINER: IJEOMA NDIKA
TABLE OF CONTENTS
ITEM PAGE NO.
1. Executive summary 2
2. Scope of examination 3
3. Description of Company 5
A. History 5
B. Holding company 6
C. Organizational chart 6
D. Service agreements 7
E. Management 9
4. Territory and plan of operations 13
A. Statutory and special deposits 13
B. Direct operations 13
C. Reinsurance 13
5. Significant operating results 14
6. Financial statements 16
A. Independent accountants 16
B. Net admitted assets 17
C. Liabilities, capital and surplus 18
D. Condensed summary of operations 19
E. Capital and surplus account 20
7. Market conduct activities 21
A. Advertising and sales activities 21
B. Underwriting and policy forms 25
C. Treatment of policyholders 27
D. Record retention 30
8 Annual statement reporting 31
9. Prior report summary and conclusions 32
10. Summary and conclusions 35
212-480-4935| ONE STATE STREET, 2ND FLOOR, NEW YORK, NY 10004-1511 | WWW.DFS.NY.GOV
March 13, 2018
Honorable Maria T. Vullo
Superintendent of Financial Services
New York, New York 10004
Madam:
In accordance with instructions contained in Appointment No. 30967, dated June 12, 2013,
and annexed hereto, an examination has been made into the condition and affairs of Ameritas Life
Insurance Corp. of New York, hereinafter referred to as “the Company,” at its home office located
at 1350 Broadway, New York, NY 10018.
Wherever “Department” appears in this report, it refers to the New York State Department
of Financial Services.
The report indicating the results of this examination is respectfully submitted.
Maria T. Vullo Superintendent
Andrew M. Cuomo Governor
2
1. EXECUTIVE SUMMARY
The material violations contained in this report are summarized below.
• The Company violated Section 4211(a) of the New York Insurance Law by failing to
file a copy of the notice of election with the Superintendent at least 10 days before the
day of such election. (See item 3E of this report)
• The Company violated Section 325(a) of the New York Insurance Law by failing to
maintain its books of account at its principal office in New York. A similar violation
was included in the prior report on examination. (See item 3E of this report)
• The Company violated Insurance Regulation No. 34, 11 NYCRR Section 215.17(a) by
not maintaining at its home office a complete advertisement file containing a specimen
copy of its health insurance advertisements, and by not indicating the manner and
extent of distribution. (See item 7A of this report)
• With respect to replacements, the Company violated various Sections of Insurance
Regulation No. 60. (See item 7A of this report)
• The Company violated Section 2112(a) of the New York Insurance Law by failing to
file a certificate of appointment with the superintendent. A similar violation was
included in the prior report on examination. (See item 7A of this report)
• The Company violated Section 2114(a)(1) of the New York Insurance Law by paying
compensation to agents prior to their appointments to act on its behalf. A similar
violation was included in the prior report on examination. (See item 7A of this report)
• The Company violated Section 3201(b)(1) of the New York Insurance Law by using a
policy form that was not filed with and approved by the superintendent. The Company
violated Section 3211(b)(2) of the New York Insurance Law by failing to fully disclose
to whole life and term life policyholders that unless payment is made on or before the
date when due or within the specified grace period thereafter, the policy shall terminate
or lapse except as to the policyholder’s right to any cash surrender value or
nonforfeiture benefit. (See item 7C of this report)
• The Company violated Section 4223(k)(1) of the New York Insurance Law by failing
to disclose the death benefit on the annual statements sent to the annuity contract
holders. (See item 7C of this report)
3
2. SCOPE OF EXAMINATION
The examination of the Company was a full scope examination as defined in the NAIC
Financial Condition Examiners Handbook, 2013 Edition (the “Handbook”). The examination
covers the three-year period from January 1, 2010, through December 31, 2012. The examination
was conducted observing the guidelines and procedures in the Handbook and, where deemed
appropriate by the examiner, transactions occurring subsequent to December 31, 2012, but prior
to the date of this report (i.e., the completion date of the examination) were also reviewed.
In the course of the examination, a review was also made of the manner in which the
Company conducts its business and fulfills its contractual obligations to policyholders and
claimants. The results of this review are contained in item 7 of this report.
The examination was conducted on a risk focused basis in accordance with the provisions
of the Handbook published by the National Association of Insurance Commissioners (“NAIC”).
The Handbook guidance provides for the establishment of an examination plan based on the
examiner’s assessment of risk in the insurer’s operations and utilizing that evaluation in
formulating the nature and extent of the examination. The examiner planned and performed the
examination to evaluate the current financial condition as well as identify prospective risks that
may threaten the future solvency of the insurer. The examiner identified key processes, assessed
the risks within those processes, and evaluated the internal control systems and procedures used to
mitigate those risks. The examination also included assessing the principles used and significant
estimates made by management, evaluating the overall financial statement presentation, and
determining management’s compliance with New York statutes and Department guidelines,
Statutory Accounting Principles as adopted by the Department and annual statement instructions.
The examination of Ameritas Life Insurance Corporation (“Ameritas Life”), a Nebraska
domestic insurer, was called by the Nebraska Department of Insurance (“NEDOI”) in accordance
with the Handbook’s guidelines, through the NAIC’s Financial Examination Electronic Tracking
System. The NEDOI served as the lead state on the examination examining Ameritas Life, with
participation from the District of Columbia examining its domestic company, Acacia Life
Insurance Company, and New York examining its domestic company, Ameritas Life Insurance
Corp. of New York. Since all states are accredited by the NAIC, they all deemed it appropriate to
rely on each other’s work.
4
Information about the Company’s organizational structure, business approach and control
environment were utilized to develop the examination approach. The Company’s risks and
management activities were evaluated incorporating the NAIC’s nine branded risk categories.
These categories are as follows:
• Pricing/Underwriting
• Reserving
• Operational
• Strategic
• Credit
• Market
• Liquidity
• Legal
• Reputational
The Company was audited annually, for the years 2010 through 2012, by the accounting
firm of Deloitte and Touche LLP. The Company received an unqualified opinion in all years.
Certain audit workpapers of the accounting firm were reviewed and relied upon in conjunction
with this examination. Ameritas Life has an internal audit department and a separate internal
control department which was given the task of assessing the internal control structure and
compliance with the NAIC Model Audit Rule (“MAR”) for the affiliated companies being
examined. Where applicable, MAR work papers and reports were reviewed and portions were
relied upon for this examination.
The examiner reviewed the corrective actions taken by the Company with respect to the
violations and recommendations contained in the prior report on examination. The results of the
examiner’s review are contained in item 9 of this report.
This report on examination is confined to financial statements and comments on those
matters which involve departure from laws, regulations or rules, or which require explanation or
description.
5
3. DESCRIPTION OF COMPANY
A. History
The Company was incorporated as a stock life insurance company under the laws of
New York on April 1, 1993, under the name Great Ameritas Life Insurance Corp. The Company
filed an amendment and restatement of its charter on November 9, 1993, to change its name to
First Ameritas Life Insurance Corp. of New York (“FALICNY”). The Company was licensed and
commenced business on May 17, 1994. Initial resources of $6,300,000, consisting of common
capital stock of $2,000,000 and paid in and contributed surplus of $4,300,000, were provided
through the sale of 2,000 shares of common stock (with a par value of $1,000 each) for $3,150 per
share.
On January 7, 1997, Ameritas Bankers Assurance Company, a domestic accident and
health insurer, merged into the Company, with the Company being the survivor. As a result of the
merger, the Company’s gross paid in and contributed surplus increased to $6,800,000.
On January 1, 2006, Ameritas Acacia Mutual Insurance Holding Company, the ultimate
parent of the Company, merged with Union Central Mutual Holding Company, at the holding
company level, to form the UNIFI Mutual Holding Company (“UNIFI”). As a result of this
merger, The Union Central Life Insurance Company (“Union Central”), an Ohio stock life
insurance company, became an affiliate of the Company. Union Central was licensed to do
business in the State of New York.
In March 2010, the FALICNY submitted an Amended and Restated Plan of Operations
(“ARPO”). Pursuant to the ARPO, Union Central would no longer write direct business in
New York within two years after the approval. All new business written in New York would be
issued through the FALICNY, but Union Central would maintain its current block of business.
The ARPO was approved by the Department on June 18, 2010. In connection with the ARPO,
Ameritas Life Insurance Corp. (“ALIC”), the immediate parent and sole shareholder of the
Company contributed $30 million to the Company on July 19, 2010.
Effective February 1, 2012, the FALICNY’s name was changed to Ameritas Life Insurance
Corp. of New York. Effective May 3, 2012, UNIFI’s name was changed to Ameritas Mutual
Holding Company (“AMHC”).
6
On February 28, 2013, the Company’s board of directors approved another Amended Plan
of Operation which was filed with the Department. This new Plan of Operation outlines an
enterprise strategy, and the impact of such strategy on the Company as the sole insurer operating
in New York within the AMHC group.
As of December 31, 2012, the Company had total capital and surplus of $33,514,966.
B. Holding Company
The Company is a wholly owned subsidiary of ALIC, a Nebraska domiciled stock life
insurance company. ALIC is in turn a wholly owned subsidiary of Ameritas Holding Company
(“AHC”), a Nebraska mutual holding company. The ultimate parent of the Company is AMHC,
a Nebraska Holding Company.
C. Organizational Chart
An organizational chart reflecting the relationship between the Company and significant
entities in its holding company system as of December 31, 2012, follows:
Ameritas Mutual Holding Company
Ameritas
Holding Company
Summit Investment Advisors, Inc.
Ameritas Life Insurance Corp.
Brokers National Life Assurance
Company.
Ameritas Life Insurance Corp. of
New York
The Union Central Life Insurance
Company
Acacia Life Insurance Company
7
D. Service Agreements
The Company had six service agreements in effect with affiliates during the examination
period.
Type of
Agreement
and
Department File
Number
Effective
Date
Provider
of
Services
Recipient
of
Services
Specific Service(s)
Covered
Expense*
For Each Year
of the
Examination
Amended and
Restated
Administrative
Services
Agreement**
File No. 29185
08/01/2002 ALIC The
Company
Management,
Advertising, Policy
Administration,
Claims
Administration,
Premium
Processing,
Underwriting,
Product filing,
Reinsurance
Processing, Policy
Issue, Customer
Service, Agent
Licensing
2010 $(4,047,248)
Administrative
Services
Agreement
File No. 42817
01/01/2011 ALIC. The
Company
Policy
Administration,
Accounting and
Actuarial Services,
Information
Technology
Services, Legal,
Human Resources,
Marketing and
Distribution, Risk
Management
2011 $( 9,503,456)
2012 $(10,375,018)
Administrative
Services
Agreement
File No. 42817
01/01/2011 AHC The
Company
Services and
expenses performed
for and incurred on
behalf of the
Company
attributable to the
UNIFI and Board
of Directors, annual
independent audits,
and annual proxy
mailings to UNIFI
members
Included in
expenses listed
above
8
Type of
Agreement
and
Department File
Number
Effective
Date
Provider
of
Services
Recipient
of
Services
Specific Service(s)
Covered
Expense*
For Each Year
of the
Examination
Administrative
Services
Agreement***
File No. 34778
03/01/2006 Union
Central
The
Company
Policy
Administration,
Underwriting,
Policy Issue,
Illustration
Software, Policy
Change, Premium
Processing,
Customer Service,
Claims, Agent
Licensing and
Compensation and
Information
Management
Support
2010 $(1,424,654)
Marketing
Services
Agreement***
File No. 34889
03/01/2006 Union
Central
The
Company
Marketing 2010 $(309,722)
Amended and
Restated
Administrative
Services
Agreement File
No. 34778A
06/01/2010 Union
Central
The
Company
Policy
Administration,
Marketing
Distribution,
Management,
Legal, Information
Technology,
Underwriting,
Policy Change,
Premium
Processing, Claims
Administration,
Product
Development
Investment
Advisory
Agreement
File No. 43137
07/01/2010 Summit
Investors
Advisors,
Inc.
The
Company
Investment
Advisory Services
2010 $(63,849)
2011 $(56,518)
2012 $(77,831)
Service
Agreement File
No. 43897
04/01/2011 Summit
Investors
Advisors,
Inc.
The
Company
Investment
Advisory Services
2011 $0
2012 $0
9
Type of
Agreement
and
Department File
Number
Effective
Date
Provider
of
Services
Recipient
of
Services
Specific Service(s)
Covered
Expense*
For Each Year
of the
Examination
Revolving Line
of Credit
Agreement File
No. 44790
10/03/2011 AHC The
Company
Revolving Line of
Credit
2011 $0
2012 $0
* Amount of Expense Incurred by the Company
** This Agreement was replaced by Department File No. 42817, effective January 1, 2011
*** This Agreement was superseded by Department File No. 34778A
E. Management
The Company’s by-laws provide that the board of directors shall be comprised of not less
than 7 and not more than 11 directors. Directors are elected for a period of one year at the annual
meeting of the stockholders held in March of each year. As of December 31, 2012, the board of
directors consisted of 11 members. Meetings of the board are held immediately following the
annual meeting of the shareholders and as frequently as the dispatch of business requires, but at
least four times in each calendar year.
The 11 board members and their principal business affiliation, as of December 31, 2012,
were as follows:
Name and Residence
Principal Business Affiliation
Year First
Elected
John P. Carsten*
East Berne, NY
Principle
John P. Carsten
1993
Robert K. Crandall*
Albany, NY
Vice President, Operations
Capital Bauer Insurance Agency, Inc
2008
Karen M. Gustin
Lincoln, NE
Senior Vice President, Group Field Sales
National Accounts and Broker Blocks
Ameritas Life Insurance Corp. of NY
2009
Robert G. Lange
Lincoln, NE
Vice President, General Counsel and Secretary
Ameritas Life Insurance Corp. of NY
2005
Robert J. Lanik*
Lincoln, NE
Chief Executive Officer
CHI, Nebraska
1993
William W. Lester
Lincoln, NE
Executive Vice President, and Corporate Treasurer
Ameritas Life Insurance Corp. of NY
2009
10
Name and Residence
Principal Business Affiliation
Year First
Elected
JoAnn M. Martin
Lincoln, NE
Chairwoman of the Board
Ameritas Life Insurance Corp. of NY
1999
David J. Myers*
Lincoln, NE
Assistant to Superintendent for General
Administration and Communication
Lincoln Public Schools
1993
James E. Rembolt*
Lincoln, NE
Counsel
Rembolt Ludtke, LLP
1993
Timmy L. Stonehocker
Lincoln, NE
Executive Vice President
Ameritas Life Insurance Corporation of NY
2011
Kenneth L. VanCleave
Lincoln, NE
President and Chief Executive Officer
Ameritas Life Insurance Corporation of NY
2002
* Not affiliated with the Company or any other company in the holding company system
The examiner’s review of the minutes of the meetings of the board of directors and its
committees indicated that meetings were well attended and that each director attended a majority
of meetings.
1. Section 4211(a) of the New York Insurance Law states:
“No election of directors of a domestic stock life insurance company shall be valid
unless a copy of the notice of election shall have been filed in the office of the
superintendent at least ten days before the day of such election in addition to the
service thereof, as required by section six hundred five of the business corporation
law.”
The examiner reviewed the Department’s record of filings made in accordance with
Section 4211(a) of the New York Insurance Law, and noted that there were no notices of elections
filed with the Department at any time during the examination period (2010-2012). However,
directors were elected at the annual meeting held in March of each year.
The Company violated Section 4211(a) of the New York Insurance Law by failing to file
a copy of the notice of election with the Superintendent at least 10 days before the day of such
election.
11
2. Section 4211(b) of the New York Insurance Law states:
“Whenever any directors of such a company shall have resigned and successors
shall have been chosen pursuant to the provisions of the by-laws, such successors
shall not take office nor exercise their duties until ten days after written notice of
their election shall have been filed in the office of the superintendent.”
The Company elected a successor to one of its directors at the board meeting on
March 1, 2011. The Company also did not notify the superintendent of such election.
The Company violated Section 4211(b) of the New York Insurance Law by electing a
successor to the board without filing a written notice of election with the Superintendent.
The following is a listing of the principal officers of the Company as of December 31,
2012:
Name Title
Kenneth L. VanCleave President and Chief Executive Officer
William W. Lester Executive Vice President and Corporate Treasurer
Timmy L. Stonehocker Executive Vice President
Robert C. Barth Senior Vice President and Chief Financial Officer
John T. Burkhard Senior Vice President, Chief Distribution Officer
Dale D. Johnson Senior Vice President and Corporate Actuary
James D. Schulz Senior Vice President, Retirement Plans
Steven J. Valerius Senior Vice President, Individual Division
Susan K. Wilkinson Senior Vice President, Planning and Risk Management
James Mikus Senior Vice President and Chief Investment Officer
Paul G. Wesling Senior Vice President, Individual Disability Income
Product Management
Robert G. Lange Vice President, General Counsel and Secretary
Mike Weckenbrock* 2nd Vice President, Chief Compliance Officer
* Designated consumer services officer per Section 216.4(c) of Department Regulation No. 64
Section 325(a) of New York Insurance Law states, in part:
“Every domestic insurer . . . shall, except as hereinafter provided, keep and maintain
at its principal office in this state . . . its books of account . . . ”
The examiner noted that the Company did not maintain financial accounting records or
data that support the filed annual statements in a durable medium (such as CDs, DVDs, Flash
drives, etc.) at the Company’s principal office in New York. As a result, the examiner was unable
to access the Company’s records in a timely manner. The Company subsequently provided the
12
examiner with a token to access the records. However, the examiner continued to encounter
problems accessing the data during the first five weeks after the start date of the examination.
The Company violated Section 325(a) of the New York Insurance Law by failing to
maintain its books of account at its principal office in New York. A similar violation was included
in the prior report on examination.
13
4. TERRITORY AND PLAN OF OPERATIONS
The Company is authorized to write life insurance, annuities and accident and health
insurance as defined in paragraphs 1, 2 and 3 of Section 1113(a) of the New York Insurance Law.
The Company is licensed to transact business in New York only. In 2012, all of life
premiums, annuity considerations and accident and health premiums were received from New
York. Policies are written on a participating and non-participating basis.
A. Statutory and Special Deposits
As of December 31, 2012, the Company had $500,000 (par value) of United States
Treasury Notes on deposit with the State of New York, its domiciliary state, for the benefit of all
policyholders, claimants and creditors of the Company.
B. Direct Operations
The Company’s insurance product offerings consist of individual life, individual annuities
and group dental and vision products.
The Company’s agency operations are conducted on a general agency and branch office
basis. Fifty-five percent of the Company’s group business is sold by captive sales representatives
of First Ameritas through independent brokers. The life and annuity business is sold through
general agency, brokerage general agents, company branches, and disability income branches.
C. Reinsurance
As of December 31, 2012, the Company had 14 reinsurance treaties in effect with nine
companies, of which eight were authorized or accredited. The Company’s life and accident and
health business is reinsured on a yearly renewable term basis. Reinsurance is provided on an
automatic basis.
The maximum retention limit for individual life contracts is $100,000. The total face
amount of life insurance ceded as of December 31, 2012, was $1,427,455,546 which represents
58% of the total face amount of life insurance in force. Reserve credit taken for reinsurance ceded
to unauthorized companies, totaling $105,857, was supported by letters of credit and miscellaneous
balances.
14
5. SIGNIFICANT OPERATING RESULTS
Indicated below is significant information concerning the operations of the Company
during the period under examination as extracted from its filed annual statements. Failure of items
to add to the totals shown in any table in this report is due to rounding.
The following table indicates the Company’s financial growth (decline) during the period
under review:
December 31,
2009
December 31,
2012
Increase
(Decrease)
Admitted assets
$40,492,963
$122,311,421
$ 81,818,458
Liabilities $21,232,310 $ 88,796,454 $ 67,564,144
Common capital stock $ 2,000,000 $ 2,000,000 $ 0
Gross paid in and contributed surplus 6,800,000 38,285,149 31,485,149
Unassigned funds (surplus) 10,460,653 (6,770,183) (17,230,836)
Total capital and surplus $19,260,653 $ 33,514,966 $ 14,254,313
Total liabilities, capital and surplus $40,492,963 $122,311,421 $ 81,818,458
The Company’s invested assets as of December 31, 2012, exclusive of separate accounts,
were mainly comprised of bonds (86.8%), mortgage loans (8.2%), cash and short-term investments
(2.9%), and policy loans (2.1%).
The majority (99.6%) of the Company’s bond portfolio, as of December 31, 2012, was
comprised of investment grade obligations.
The following indicates, for each of the years listed below, the amount of life insurance
issued and in force by type (in thousands of dollars):
Individual Individual Whole Life Term
Year
Issued
In Force
Issued
In Force
2010 $130,296 $348,844 $ 19,319 $ 224,217
2011 $481,148 $723,201 $626,723 $ 850,141
2012 $355,153 $994,559 $730,757 $1,465,338
15
As part of the two paper strategy to only market products on Ameritas Life Insurance Corp.
and Ameritas Life Insurance Corp. of New York paper, the Company shifted New York sales from
an affiliated Company, Union Central, to Ameritas Life Insurance Corp. of New York which is the
cause of the fluctuations.
The ordinary lapse ratio for each of the examination years was 18.5% in 2010, 8.2% in
2011, and 7.9% in 2012.
The high lapse ratio in 2010 was due to an agent with poor early lapse experience.
The following is the net gain (loss) from operations by line of business after federal income
taxes but before realized capital gains (losses) reported for each of the years under examination in
the Company’s filed annual statements:
2010 2011 2012
Ordinary:
Life insurance $(2,497,855) $(7,470,389) $(3,325,453)
Individual annuities (67,715) (990,920) 342,921
Total ordinary $(2,565,570) $(8,461,309) $(2,982,532)
Group:
Annuities (124,440) (454,402) (514,088)
Total group $ (124,440) $ (454,402) $ (514,088)
Accident and health:
Group $ 817,152 $ 824,793 $ 708,545
Other (135,648) (379,386) (710,268)
Total accident and health $ 681,504 $ 445,407 $ (1,723)
All other lines $ 324,396 $(1,319,064) $ (687,859)
Total $(1,684,109) $(9,789,367) $(4,186,202)
Losses in the ordinary life business were primarily due to strain from new sales. The
fluctuation in income for the annuity business is attributed to the variable annuity business due to
higher reserves established in 2011. Changes in assumptions around the levels of cash and initial
reserve factors made in 2011 increased the reserves. The new assumptions resulted in favorable
changes for year-end 2012, and created a positive impact on income in 2012.
Losses in the disability income business were primarily due to product development and
acquisition costs.
16
6. FINANCIAL STATEMENTS
The following statements show the assets, liabilities, capital and surplus as of
December 31, 2012, as contained in the Company’s 2012 filed annual statement, a condensed
summary of operations and a reconciliation of the capital and surplus account for each of the years
under review. The examiner’s review of a sample of transactions did not reveal any differences
which materially affected the Company’s financial condition as presented in its financial
statements contained in the December 31, 2012, filed annual statement.
A. Independent Accountants
The firm of Deloitte and Touche was retained by the Company to audit the Company’s
combined statutory basis statements of financial position of the Company as of December 31st of
each year in the examination period, and the related statutory-basis statements of operations,
capital and surplus, and cash flows for the year then ended.
Deloitte and Touche concluded that the statutory financial statements presented fairly, in
all material respects, the financial position of the Company at the respective audit dates. Balances
reported in these audited financial statements were reconciled to the corresponding years’ annual
statements with no discrepancies noted.
17
B. Net Admitted Assets
Bonds $ 87,059,380
Mortgage loans on real estate:
First liens 8,231,082
Cash, cash equivalents and short term investments 2,931,807
Contract loans 2,069,995
Investment income due and accrued 1,224,398
Premiums and considerations:
Uncollected premiums and agents’ balances in the course of collection 1,647,364
Deferred premiums, agents’ balances and installments booked but
deferred and not yet due
1,577,580
Reinsurance:
Amounts recoverable from reinsurers 106,058
Other amounts receivable under reinsurance contracts 1,218,839
Amounts receivable relating to uninsured plans 85,593
Current federal and foreign income tax recoverable and interest thereon 128,824
Receivables from parent, subsidiaries and affiliates 16,261
Health care and other amounts receivable 45,963
NY Regulation 172 reinsurance premium refund 680,350
From separate accounts, segregated accounts and protected cell accounts 15,287,927
Total admitted assets $122,311,421
18
C. Liabilities, Capital and Surplus
Aggregate reserve for life policies and contracts $ 62,845,046
Aggregate reserve for accident and health contracts 369,799
Liability for deposit-type contracts 469,410
Contract claims:
Life 248,220
Accident and health 1,220,312
Provision for policyholders’ dividends and coupons payable in
following calendar year – estimated amounts
Dividends apportioned for payment 470,000
Premiums and annuity considerations for life and accident and health
contracts received in advance
122,701
Contract liabilities not included elsewhere:
Provision for experience rating refunds 365,496
Other amounts payable on reinsurance 2,031,399
Interest maintenance reserve 16,432
Commissions to agents due or accrued 335,869
General expenses due or accrued 241,569
Transfers to separate accounts due or accrued (3,300)
Taxes, licenses and fees due or accrued, excluding federal income taxes 285,000
Amounts withheld or retained by company as agent or trustee (2,260)
Amounts held for agents’ account 39,815
Remittances and items not allocated 495,799
Liability for benefits for employees and agents if not included above 1,232,589
Miscellaneous liabilities:
Asset valuation reserve 374,663
Reinsurance in unauthorized companies 47,534
Payable to parent, subsidiaries and affiliates 2,140,566
Liability for amounts held under uninsured accident and health plans 4,333
Deferred rent liability 84,560
Unclaimed checks 72,976
From Separate Accounts statement 15,287,927
Total liabilities $ 88,796,454
Common capital stock $ 2,000,000
Gross paid in and contributed surplus $ 38,285,149
Unassigned funds (surplus) (6,770,183)
Surplus $ 31,514,966
Total capital and surplus $ 33,514,966
Total liabilities, capital and surplus $122,311,421
19
D. Condensed Summary of Operations
2010
2011
2012
Premiums and considerations $29,931,401 $71,562,075 $71,387,494
Investment income 1,892,670 2,988,739 4,187,961
Commissions and reserve adjustments
on reinsurance ceded
59,253
323,381
1,852,153
Miscellaneous income 22,431 120,301 305,770
Total income $31,905,755 $74,994,496 $77,733,378
Benefit payments $19,100,634 $20,310,849 $41,551,994
Increase in reserves 3,454,198 34,615,730 10,612,195
Commissions 2,099,987 5,044,566 6,193,789
General expenses and taxes 9,846,159 15,796,411 18,028,852
Increase in loading on deferred and
uncollected premium
(698,125)
361,781
(213,337)
Net transfers to (from) Separate Accounts (3,110) 8,702,714 5,317,757
Miscellaneous deductions 2,576 7,360 5,506
Total deductions $33,802,318 $84,839,411 $81,496,757
Net (loss) $ (1,896,561) $ (9,844,916) $ (3,763,380)
Dividends 137,444 79,121 505,310
Federal and foreign income taxes incurred (349,897) (134,669) (82,488)
Net (loss) from operations
before net realized capital gains
$ (1,684,109)
$ (9,789,367)
$ (4,186,202)
Net realized capital (losses) (1,901) (23,355) (45,026)
Net loss $ (1,686,010) $ (9,812,722) $ (4,231,228)
20
E. Capital and Surplus Account
2010
2011
2012
Capital and surplus,
December 31, prior year
$19,260,653
$ 46,877,495
$36,594,796
Net loss $ (1,686,010) $ (9,812,722) $ (4,231,228)
Change in net deferred income tax 344,179 3,099,984 445,320
Change in non-admitted assets
and related items
(1,020,947)
(3,954,989)
(94,951)
Change in liability for reinsurance in
unauthorized companies
28,381
(39,820)
(7,714)
Change in asset valuation reserve (48,761) (98,987) (117,625)
Surplus adjustments:
Paid in 30,000,000 558,780 926,369
Prior year reserve adjustment 0 (34,946) 0
Net change in capital and surplus for the year $27,616,842 $(10,282,700) $ (3,079,830)
Capital and surplus,
December 31, current year
$46,877,495
$ 36,594,796
$33,514,966
21
7. MARKET CONDUCT ACTIVITIES
The examiner reviewed various elements of the Company’s market conduct activities
affecting policyholders, claimants, and beneficiaries to determine compliance with applicable
statutes and regulations and the operating rules of the Company.
A. Advertising and Sales Activities
The examiner reviewed a sample of the Company’s advertising files and the sales activities
of the agency force including trade practices, solicitation and the replacement of insurance policies.
1. Insurance Regulation No. 34, 11 NYCRR Section 215.17(a) states, in part:
“Each insurer shall maintain at its home or principal office a complete file
containing every printed, published or prepared advertisement of its individual
policies and typical printed, published or prepared advertisements of its blanket,
franchise and group policies hereafter disseminated in this or any other state
whether or not licensed in such other state, with a notation attached to each such
advertisement which shall indicate the manner and extent of distribution . . .”
2. Insurance Regulation No. 34-A, 11 NYCRR Section 219.5(a states in part:
“Each insurer shall maintain at its home office a complete file containing a
specimen copy of every printed, published or prepared advertisement hereafter
disseminated in this State, with a notation indicating the manner and extent of
distribution and the form number of any policy advertised. In order to be complete,
the file must contain all advertisements whether used by the company, its agents or
solicitors or other persons...”
The Company provided the examiner with a list of the life insurance advertising files that
were used during the examination period. However, the examiner could not locate any physical
or electronic evidence of any of the advertisements at the Company’s home office. The examiner
was unable to access the electronic database containing the group health insurance advertisement
files.
Both Insurance Regulations No. 34 and No. 34-A, which apply to advertisements of health
insurance products and life insurance products, respectively, require that the Company maintain a
complete file containing specimen copies of its advertisements at its home office, with a notation
that indicates the manner and extent of distribution.
22
The Company violated Insurance Regulation No. 34, 11 NYCRR Section 215.17(a) by not
maintaining at its home office a complete advertisement file containing a specimen copy of its
health insurance advertisements, and by not indicating the manner and extent of distribution. A
similar violation was included in the prior report on examination.
The Company also violated Insurance Regulation No. 34-A, 11 NYCRR Section 219.5(a)
by not maintaining at its home office a complete advertisement file containing a specimen copy of
its life insurance advertisements, and by not indicating the manner and extent of distribution. A
similar violation was included in the prior report on examination.
3. Insurance Regulation No. 60, 11 NYCRR Section 51.6(b) of Department Regulation No.
60 states, in part
“Where a replacement has occurred or is likely to occur, the insurer replacing the
life insurance policy or annuity contract shall: . . .
(3) Examine any proposal used, including the sales material used in the sale of the
proposed life insurance policy or annuity contract, and the “Disclosure Statement”
and ascertain that they are accurate and meet the requirements of the Insurance Law
and this Part;
(4) Within 10 days of receipt of the application furnish to the insurer whose
coverage is being replaced a copy of any proposal, including the sales material used
in the sale of the proposed life insurance policy or annuity contract, and the
completed "Disclosure Statement" . . .
(6) Where the required forms are received with the application and found to be in
compliance with this Part, maintain copies of: any proposal, including the sales
material used in the sale of the proposed life insurance policy or annuity contract;
proof of receipt by the applicant of the "IMPORTANT Notice Regarding
Replacement or Change of Life Insurance Policies or Annuity Contracts"; the
signed and completed "Disclosure Statement"; and the notification of replacement
to the insurer whose life insurance policy or annuity contract is to be replaced
indexed by agent and broker, for six calendar years or until after the filing of the
report on examination in which the transaction was subject to review by the
appropriate insurance official of its state of domicile, whichever is later;
(7) Where the required forms are not received with the application, or if the forms
do not meet the requirements of this Part or are not accurate, within ten days from
the date of receipt of the application either have any deficiencies corrected or reject
the application and so notify the applicant of such rejection and the reason therefor.
In such cases, the insurer shall maintain any material used in the proposed sale, in
accordance with the guidelines of Section 51.6(b)(6) herein; . . .
23
(9) In the event the life insurance policy or annuity contract issued differs from the
life insurance policy or annuity contract applied for, ensure that the requirements
of this Part are met with respect to the information relating to the life insurance
policy or annuity contract as issued, including but not limited to the revised
‘Disclosure Statement’, any revised or additional sales material used and
acknowledgment by the applicant of receipt of such revised material.
Insurance Regulation No. 60, 11 NYCRR Section 51.7(b) states, in part
“No insurer, agent, representative, officer, or employee of an insurer or any other
licensee of this Department shall fail to comply with or engage in other practices
that would prevent the orderly working of this part in accomplishing its intended
purpose in the protection of policyholders….”
The examiner reviewed a sample of 15 individual life insurance policy replacement files.
The examiner’s review revealed that 12 out of the 15 (80%) policy files that were replaced
contained material errors.
In one of the 15 instances reviewed (6.7%), the Company did not complete the Summary
Result Comparison page of the Disclosure Statement. In addition, the agent and the applicant
signed the application before the Important Notice and the Disclosure Statement were presented
to the applicant.
In two of the 15 (13.3%) replacements reviewed, the Company failed to notify the insurer
whose policy was being replaced of the proposed replacement. The Company also failed to submit
to the insurer whose policy was being replaced, a list of all life insurance policies proposed to be
replaced along with the proper authorization from the applicant so that the information necessary
to complete the disclosure statement could be requested from the existing carrier with respect to
the insurance policy contract proposed to be replaced and the completed Disclosure Statement.
The Company violated Insurance Regulation No. 60, 11 NYCRR Section 51.6(b)(3) by
failing to examine the Disclosure Statement and ascertain that it was accurate and met the
requirements of the Regulation.
The Company violated Insurance Regulation No. 60, 11 NYCRR Section 51.6(b)(7) by
failing to reject the application when the required forms were not received or the forms did not
meet the requirements of Insurance Regulation No. 60.
The Company violated Insurance Regulation No. 60, 11 NYCRR Section 51.6(b)(6) by
failing to maintain copies of the signed and completed disclosure statements and the notification
24
of replacement to the insurer whose life insurance contract is to be replaced, for six calendar years
or until after the filing of the report in which the transaction was subject to review by the
Department, whichever is later.
In five of the 15 (33.3%) replacements reviewed, the Company did not provide a revised
Disclosure Statement when the policy issued was different from the policy that was applied for.
The Company violated Insurance Regulation No. 60, 11 NYCRR Section 51.6(b)(9) by
failing to provide the applicant with a revised Disclosure Statement where the insurance policy
issued was different from the life insurance policy applied for.
As a result of the numerous violations noted above, the Company violated Insurance
Regulation No. 60, 11 NYCRR Section 51.7(b) by failing to fully comply with the orderly working
of the Regulation in accomplishing its intended purpose in the protection of policyholders.
The examiner recommends that the Company implement a training program to inform and
train its employees, agents and brokers with respect to the requirements of Insurance Regulation
No. 60.
The examiner also recommends that the Company develop and implement an audit
program designed to review, test and monitor compliance with Insurance Regulation No. 60.
4. Section 2112 of the New York Insurance Law states, in part:
“(a) Every insurer . . . doing business in this state shall file a certificate of
appointment in such form as the superintendent may prescribe in order to appoint
insurance agents to represent such insurer, fraternal benefit society or health
maintenance organization…”
Section 2114(a)(1) of the New York Insurance Law states, in part:
“No insurer . . . doing business in this state shall pay any commission or other
compensation to any person, firm or corporation, for any services in obtaining in
this state any new contract of life insurance . . . except to a licensed life insurance
agent of such insurer . . .”
The examiner reviewed a sample of policies produced by 11 agents and noted that one of
the 11 (9.1%) agents sold insurance business and were compensated for such business before they
were appointed by the Company.
25
The Company violated Section 2112(a) of the New York Insurance Law by failing to file
a certificate of appointment with the superintendent. A similar violation was included in the
prior report on examination.
The Company violated Section 2114(a)(1) of the New York Insurance Law by paying
compensation to agents prior to their appointments to act on its behalf. A similar violation was
included in the prior report on examination.
5. Section 2112(d) of the New York Insurance Law states, in part:
“Every insurer . . . doing business in this state shall, upon termination of the
certificate of appointment . . . of any insurance agent licensed in this state, or upon
termination for cause . . . file with the superintendent within thirty days a statement,
in such form as the superintendent may prescribe, of the facts relative to such
termination for cause. The insurer . . . shall provide, within fifteen days after
notification has been sent to the superintendent, a copy of the statement filed with
the superintendent to the insurance producer at his, or her or its last known address
by certified mail, return receipt requested, postage prepaid or by overnight delivery
using a nationally recognized carrier.”
The Company terminated a producer for cause. The Company provided letters and
correspondence that were mailed to the producer but failed to provide the copy of the form that
was filed with the Superintendent showing facts relative to the termination for cause.
The Company violated Section 2112(d) of the New York Insurance Law by failing to file
with the superintendent, within thirty days, a statement in such form as the superintendent may
prescribe of the facts relative to such termination for cause.
B. Underwriting and Policy Forms
The examiner reviewed a sample of new underwriting annuity files, both issued and
declined, and the applicable policy forms.
1. Section 3201 of the New York Insurance Law states, in part:
“(a) In this article, "policy form" means any policy, contract, certificate, or evidence
of insurance and any application therefor, or rider or endorsement thereto . . .
26
(b)(1) No policy form shall be delivered or issued for delivery in this state unless it
has been filed with and approved by the superintendent as conforming to the
requirements of this chapter and not inconsistent with law. . . .”
The examiner reviewed a sample of 15 individual annuities and in two of the 15 (13.3%)
instances, the examiner noted the use of a form “Amendment of Application Form” included in
the two contracts. The “Amendment of Application Form” was not filed with and approved by
the superintendent.
The Company violated Section 3201(b)(1) of the New York Insurance Law by using a
policy form that was not filed with and approved by the superintendent.
2. Section 3209(g) of the New York Insurance Law states:
“Every insurer shall maintain, at its home office or principal office, a complete file
containing one copy of each policy summary form authorized by the insurer for use
pursuant to this section.”
The Company did not maintain at its home office, a complete file containing one copy of
each policy summary form authorized for its use.
The Company violated Section 3209(g) of the New York Insurance Law by failing to
maintain, at its home office, a complete file containing one copy of each policy summary form
authorized for its use.
27
C. Treatment of Policyholders
The examiner reviewed a sample of various types of claims, surrenders, changes and
lapses. The examiner also reviewed the various controls involved, checked the accuracy of the
computations and traced the accounting data to the books of account.
1. Insurance Regulation No. 64, 11 NYCRR Section 216.5(a) states, in part:
“(1) Every insurer shall commence an investigation of any claim filed by a
claimant, or by a claimant's authorized representative, within 15 business days of
receiving notice of claim. An insurer shall furnish to every claimant, or claimant's
authorized representative, a notification of all items, statements and forms, if any,
which the insurer reasonably believes will be required of the claimant, within 15
business days of receiving notice of the claim…”
The examiner reviewed all seven (100%) of the death claims processed by the Company
during the examination period. In of one out of seven (14.3%) death claim files, the Company
failed to notify the claimant of all items, statements and forms required of the claimant within 15
business days of receiving notice of the claim.
The Company violated Insurance Regulation No. 64, 11 NYCRR Section 216.5(a)(1) by
failing to furnish to the claimant a notification of all items, statements and forms which were
required of the claimant, within 15 business days of receiving notice of the claim.
2. Insurance Regulation No. 64, 11 NYCRR Section 216.6(c) states, in part:
“(1) Within 15 business days after receipt by the insurer of a properly executed
proof of loss and receipt of all items, statements and forms which the insurer
requested from the claimant, the claimant, or the claimant's authorized
representative, shall be advised in writing of the acceptance or rejection of the claim
by the insurer . . . ”
The review of one out of seven (14.3%) death claim files revealed that the Company did
not advise the claimant of the acceptance of the claim within 15 business days after receipt by the
Company of all properly executed proof of loss, statements and forms.
The Company violated Insurance Regulation No. 64, 11 NYCRR Section 216.6(c) by
failing to advise the claimant of the acceptance of the claim within 15 business days after receipt
by the Company of all properly executed proof of loss, statements and forms.
28
4. Insurance Regulation No. 64, 11 NYCRR Section 216.11 states, in part:
“ . . . To enable department personnel to reconstruct an insurer's activities, all
insurers subject to the provisions of this Part must maintain within each claim file
all communications, transactions, notes and work papers relating to the claim. All
communications and transactions, whether written or oral, emanating from or
received by the insurer shall be dated by the insurer. Claim files must be so
maintained that all events relating to a claim can be reconstructed by the
Department of Financial Services examiners. Insurers shall either make a notation
in the file or retain a copy of all forms mailed to claimants.”
The examiner selected a sample of 25 surrender claim files for review. In three out of 25
(12%) surrender claim files reviewed, the file did not contain the necessary information needed to
review the files.
The examiner could not determine the contract value at the inception of the contract, the
contract value at the time of the surrender, and whether surrender penalties were applicable.
Furthermore, the examiner was unable to determine the date that all the necessary information to
process the surrender was received by the Company or the surrender payment date.
The Company violated Insurance Regulation No. 64, 11 NYCRR Section 216.11 by failing
to maintain complete claim files so that events relating to a claim could be reconstructed by the
examiner.
5. Section 4223(k)(1) of the New York Insurance Law states, in part:
“At least once in each contract year, the company shall mail to each holder of a
contract subject to this section under which benefit payments have not yet
commenced a statement as of a date during such year as to any paid-up annuity
benefit or the amount available under each account to provide a paid-up annuity
benefit, any cash surrender benefit and any death benefit, under the contract . . . ”
The examiner reviewed a sample of 10 annual statements mailed to policyholders during
the period under examination. Of the 10, five statements were mailed to annuity contract holders.
The Company did not disclose the death benefit on any of the five (100%) annual statements sent
to the annuity contract holders for each year under examination.
The Company violated Section 4223(k)(1) of the New York Insurance Law by failing to
disclose the death benefit on the annual statements sent to the annuity contract holders.
29
6. Section 3211(b) of the New York Insurance Law states, in part:
“The notice required by paragraph one of subsection (a) hereof shall: . . .
(2) state the amount of such payment, the date when due, the place where and the
person to whom it is payable; and shall also state that unless such payment is made
on or before the date when due or within the specified grace period thereafter, the
policy shall terminate or lapse except as to the right to any cash surrender value or
non-forfeiture benefit.”
a. The examiner reviewed the payment due notices mailed to whole life and term life
policyowners at least 15, but not more than forty-five days prior to the date when the premium was
due. The notice provided by the Company to demonstrate compliance with Section 3211(a) of the
New York Insurance Law is two-sided (front and back). The following language is printed on the
back side of the notice:
“Non-Payment of Premium
Premium Due – Fixed premium contracts, such as Whole Life and Term policies.
Non-payment of the Premium Due will result in termination of this policy, subject
to the general provisions of the policy.”
In addition to the Company’s failure to prominently display this important disclosure on
the front side of the premium due notice, the disclosure that appears on the back side of the notice
does not comply with Section 3211(b)(2) of the New York Insurance Law because it does not
include the required language, “unless such payment is made on or before the date when due or
within the specified grace period thereafter, the policy shall terminate or lapse except as to the
right to any cash surrender value or non-forfeiture benefit”.
The Company violated Section 3211(b)(2) of the New York Insurance Law by failing to
fully disclose to whole life and term life policyholders that unless payment is made on or before
the date when due or within the specified grace period thereafter, the policy shall terminate or lapse
except as to the policyholder’s right to any cash surrender value or nonforfeiture benefit.
The examiner recommends that the Company revise the premium due notice for its whole
life and term life policies to prominently show the disclosure language, in entirety, as required by
Section 3211(b)(2) of the New York Insurance Law on the front side of the notice.
30
b. The examiner’s review of a sample universal life insufficiency notices revealed that in all
instances the notices omitted the language, “except as to the right to any cash surrender value or
non-forfeiture benefit”.
The Company violated Section 3211(b)(2) of the New York Insurance Law by utilizing
insufficiency notices that did not include the required language for its universal life policies.
The examiner recommends that the Company conduct a study to identify insureds who
have died within one year of the lapse of their policy and who received premium notice that failed
to comply with Section 3211 of the New York Insurance Law. The study should include a cross-
check through the social security death master file.
The examiner also recommends that the Company pay the appropriate beneficiary or
beneficiaries the total death benefit due under the policies where death occurred within one year
of policy lapse processing.
D. Record Retention
Insurance Regulation No. 152, 11 NYCRR Section 243.2(b) states, in part:
“Except as otherwise required by law or regulation, an insurer shall maintain:
(4) A claim file for six calendar years after all elements of the claim are resolved
and the file is closed or until after the filing of the report on examination in which
the claim file was subject to review, whichever is longer. A claim file shall show
clearly the inception, handling and disposition of the claim, including the dates that
forms and other documents were received.”
The examiner’s review of two out of seven (28.6%) death claim files referenced earlier
revealed that the claim files did not show clearly the inception, handling and disposition of the
claims, including the dates that forms and other documents were received.
The Company violated Insurance Regulation No. 152, 11 NYCRR Section 243.2(b)(4) by
failing to maintain claim files that show clearly the inception, handling and disposition of the
claim, including the dates that forms and other documents were received.
31
8. ANNUAL STATEMENT REPORTING
The Company’s 2012 filed annual statement, as filed with the Department during the
examination period, was found to contain numerous reporting errors and misclassifications of
accounts. The following reporting errors were among those identified during the review:
The Company reported $22,628,769 as surrenders in 2012. The examiner noted that the
data files, which tied to the reported amount, contained lapses, conversions, reinstatements and
death claims thereby overstating the amount reported as surrenders on the Summary of Operations
page of the annual statement.
The Company also incorrectly reported lapses as surrenders, terminations and cancellations
on the Exhibit of Life Insurance. This error has resulted in an overstatement of the number and
amount of lapses on the Exhibit of Life Insurance and an understatement in the number and amount
of surrenders in the Exhibit of Life Insurance.
The examiner recommends that the Company exercise greater care in the compilation of
its data for reporting purposes and comply with the annual statement instructions when preparing
its filings with the Department.
32
9. PRIOR REPORT SUMMARY AND CONCLUSIONS
Following are the violations and recommendations contained in the prior report on
examination and the subsequent actions taken by the Company in response to each citation:
Item Description
A The Company violated Section 325(a) of the New York Insurance Law by failing
to maintain all minutes of meetings of its shareholders, policyholders, board of
directors and committees thereof and their books of account at its principal office
in New York.
The Company again failed to comply with Section 325(a) of the New York
Insurance Law. See item 3E of this report.
B The Company violated Section 4228(f)(1)(A) of the New York Insurance Law
by paying agent compensation under a general agent bonus plan that was not filed
with the Department.
The Company subsequently filed its agent compensation plan with the
Department.
C The examiner recommends that the Company develop and maintain supporting
details for all components of its dividend formula, including the expense
component.
The Company has developed a process to identify and monitor details underlying
the expense factors in the dividend formula
D The examiner recommends that the Company demonstrate first year dividends
are actually earned on the basis of its own experience, or, alternatively,
demonstrate that its parent’s experience is representative of its own experience.
The Company has updated its illustration systems to show zero dividends in its
first year.
E The Company violated Section 4233(b)(6) of the New York Insurance Law by
using an intermediate line on Schedule NP as a balancing item when determining
the surplus of each line of business.
The Company has established a process where surplus is reviewed for Schedule
NP annually
33
Item Description
F The examiner recommends that the Company determine the surplus of each line
of business in accordance with Section 4233(b)(6) of the New York Insurance
Law and as set forth in Schedule NP, without using any intermediate line as a
balancing item.
The Company has established a process where surplus is reviewed for Schedule
NP annually
G The Company violated Sections 2112(a) and 2114(a)(1) of the New York
Insurance Law by paying compensation to unappointed agents.
The Company again violated Section 2112(a) and 2114(a)(1) of the New York
Insurance Law. See item 7A of this report.
H The Company violated Section 215.17(a) of Department Regulation No. 34 and
Section 219.5(a) of Department Regulation No. 34-A by not maintaining at its
home office a complete advertisement file, and by not indicating the manner and
extent of distribution of its advertisements.
The Company again violated Section 215.17(a) of Department Regulation
No. 34 and Section 219.5(a) of Department Regulation No. 34-A. See item 7A
of this report.
I The Company violated Section 51.6(b)(7) of Department Regulation No. 60 by
accepting applications with inaccurate or deficient disclosure statements without
requiring the correction of such inaccuracies and/or deficiencies, or rejecting the
applications.
The review of a sample of replacements did not reveal any instance where the
disclosure statement did not inform the insured of the use of the cash value to pay
down the premium.
J The Company violated Section 51.7(a)(1) of Department Regulation No. 60 by
accepting Disclosure Statements that contained potentially deceptive or
misleading information from its agents.
The review of a sample of replaced files did not reveal any instance where the
Company accepted Disclosure Statements that contained potentially deceptive or
misleading information from its agents.
34
Item Description
K The Company violated Section 2611(a) of the New York Insurance Law by
failing to request and receive written consent forms from applicants prior to
subjecting the applicants to HIV related tests.
The examiner noted that the Company now requests and receives written consent
forms from applicants prior to subjecting applicants to HIV related tests.
L The Company violated Section 3201(b)(1) of New York Insurance Law by using
policy application forms of its affiliate which had not been filed with and
approved by the superintendent.
The review of the underwriting files during the current examination did not reveal
any instance where the Company used the application forms of its affiliates.
M The Company violated Section 3207(b) of the New York Insurance Law by
issuing policies on juveniles that exceeded the maximum face value permitted.
The review of a sample of the underwriting files did not reveal any instance
where the Company issued policies on juveniles that exceeded the permitted
maximum face value.
35
10. SUMMARY AND CONCLUSIONS
Following are the violations and recommendations contained in this report:
Item Description Page No(s).
A The Company violated Section 4211(a) of the New York Insurance Law
by failing to file a copy of the notice of election with the Superintendent
at least 10 days before the day of such election.
10
B The Company violated Section 4211(b) of the New York Insurance Law
by electing a successor to the board without filing a written notice of
election with the Superintendent.
11
C The Company violated Section 325(a) of the New York Insurance Law
by failing to maintain its books of account at its principal office in New
York. A similar violation was included in the prior report on
examination.
12
D The Company violated Insurance Regulation No. 34, 11 NYCRR Section
215.17(a) by not maintaining at its home office a complete advertisement
file containing a specimen copy of its health insurance advertisements,
and by not indicating the manner and extent of distribution. A similar
violation was included in the prior report on examination.
22
E The Company also violated Insurance Regulation No. 34-A, 11 NYCRR
Section 219.5(a) by not maintaining at its home office a complete
advertisement file containing a specimen copy of its life insurance
advertisements, and by not indicating the manner and extent of
distribution. A similar violation was included in the prior report on
examination.
22
F The Company violated Insurance Regulation No. 60, 11 NYCRR Section
51.6(b)(3) by failing to examine the disclosure statement to ascertain that
it was accurate and met the requirements of the Regulation.
23
36
Item Description Page No(s).
G The Company violated Insurance Regulation No. 60, 11 NYCRR Section
51.6(b)(7) by failing to reject the application when the required forms
were not received or the forms did not meet the requirements of Insurance
Regulation No. 60.
23
H The Company violated Insurance Regulation No. 60, 11 NYCRR Section
51.6(b)(6) by failing to maintain copies of the signed and completed
disclosure statements and the notification of replacement to the insurer
whose life insurance contract is to be replaced, for six calendar years or
until after the filing of the report in which the transaction was subject to
review by the Department, whichever is later.
23
I The Company violated Insurance Regulation No. 60, 11 NYCRR Section
51.6(b)(9) by failing to provide the applicant with a revised Disclosure
Statement where the insurance policy issued was different from the life
insurance policy applied for.
24
J The Company violated Insurance Regulation No. 60, 11 NYCRR Section
51.7(b) by failing to fully comply with the orderly working of the
Regulation in accomplishing its intended purpose in the protection of
policyholders.
24
K The examiner recommends that the Company implement a training
program to inform and train its employees, agents and brokers with
respect to the requirements of Insurance Regulation No. 60.
24
L The examiner also recommends that the Company develop and
implement an audit program designed to review, test and monitor
compliance with Insurance Regulation No. 60.
24
M The Company violated Section 2112(a) of the New York Insurance Law
by failing to file a certificate of appointment with the superintendent. A
similar violation was included in the prior report on examination.
25
N The Company violated Section 2114(a)(1) of the New York Insurance
Law by paying compensation to agents prior to their appointments to act
on its behalf. A similar violation was included in the prior report on
examination.
25
37
Item Description Page No(s).
O The Company violated Section 2112(d) of the New York Insurance Law
by failing to file with the superintendent, within thirty days, a statement
in such form as the superintendent may prescribe of the facts relative to
such termination for cause.
25
P The Company violated Section 3201(b)(1) of the New York Insurance
Law by using a policy form that was not filed with and approved by the
superintendent.
26
Q The Company violated Section 3209(g) of the New York Insurance Law
by failing to maintain, at its home office, a complete file containing one
copy of each policy summary form authorized for its use.
26
R The Company violated Insurance Regulation No. 64, 11 NYCRR Section
216.5(a)(1) by failing to furnish to the claimant a notification of all items,
statements and forms which were required of the claimant, within 15
business days of receiving notice of the claim.
27
S The Company violated Insurance Regulation No. 64, 11 NYCRR Section
216.6(c) by failing to advise the claimant of the acceptance of the claim
within 15 business days after receipt by the Company of all properly
executed proof of loss, statements and forms.
27
T The Company violated Insurance Regulation No. 64, 11 NYCRR Section
216.11 by failing to maintain complete claim files so that events relating
to a claim could be reconstructed by the Department of Financial Services
examiner.
28
U The Company violated Section 4223(k)(1) of the New York Insurance
Law by failing to disclose the death benefit on the annual statements sent
to the annuity contract holders.
28
V The Company violated Section 3211(b)(2) of the New York Insurance
Law by failing to fully disclose to whole life and term life policyholders
that unless payment is made on or before the date when due or within the
specified grace period thereafter, the policy shall terminate or lapse
except as to the policyholder’s right to any cash surrender value or
nonforfeiture benefit.
29
38
AA The Company violated Insurance Regulation No. 152, 11 NYCRR
Section 243.2(b)(4) by failing to maintain claim files that show clearly
the inception, handling and disposition of the claim, including the dates
that forms and other documents were received.
30
Item Description Page No(s).
W The examiner recommends that the Company revise the premium due
notice for its whole life and term life policies to prominently show the
disclosure language, in entirety, as required by Section 3211(b)(2) of the
New York Insurance Law on the front side of the notice.
29
X The Company violated Section 3211(b)(2) of the New York Insurance
Law by utilizing insufficiency notices that did not include the required
language for its universal life policies.
29
Y The examiner recommends that the Company conduct a study to identify
insureds who have died within one year of the lapse of their policy and
who received premium notice that failed to comply with Section 3211 of
the New York Insurance Law. The study should include a cross-check
through the social security death master file.
30
Z The examiner also recommends that the Company pay the appropriate
beneficiary or beneficiaries the total death benefit due under the policies
where death occurred within one year of policy lapse processing.
30
AB The examiner recommends that the Company exercise greater care in the
compilation of its data for reporting purposes and comply with the annual
statement instructions when preparing its filings with the Department.
31
Respectfully submitted,
/s/
Ijeoma Ndika
Senior Insurance Examiner
STATE OF NEW YORK )
)SS:
COUNTY OF NEW YORK )
Ijeoma Ndika, being duly sworn, deposes and says that the foregoing report, subscribed by
her, is true to the best of her knowledge and belief.
/s/
Ijeoma Ndika
Subscribed and sworn to before me
this day of
